BANK NIFTY is set for a pullback!
On Wednesday, the Banknifty declined by 1.56% and it formed a bearish candle carrying a lower high and lower low as compared to its prior trading session.
With this, the Banknifty closed below the 38.2% retracement level and below the prior lows. The index declined by 3677 points or 8.91% in the last six trading sessions. The sharper move may attract some counter-trend consolidation sooner or later. It is trading below the short and medium-term moving averages. The index is forming a strong bearish candle on the monthly chart.
In any case, if it declines below the range of 37250 to 37065, the index will form the most bearish candle possible. The formation of a bearish candle on the monthly chart could signal a strong reversal. Below this zone, the downside targets are at 200DMA of 36589 and 35938, which is a 61.8% retracement level of the prior up trend. On the upside, the index has to move above the previous day's high for a bounce. For continuation of the up move this bounce must sustain above the level of 38621.
The daily MACD is almost at the zero line. The RSI is in a strong bearish zone. In short, the trend is down and any pullback rallies should be used to build up fresh short positions. Though volatility would be high on the eve of monthly derivatives expiry, hence, follow proper risk management tactics.
Strategy for the day
Bank Nifty closed below the prior lows. The index looks very weak in all timeframes. A move above the level of 37900 is positive, and it can test the level of 38270. Maintain a stop loss at the level of 37718. But, a move below the level of 37700 is negative, and it can test the level of 37534. Maintain a stop loss at the level of 37880.
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